This might be the end of Walmart’s reign.
Amazon exceeded Wall Street expectations for the latest quarter, reporting $187.8 billion in revenue, surpassing the forecast of $187.3 billion. This performance also allowed Amazon to surpass Walmart in revenue for the first time. Earnings per share were $1.86, beating the predicted $1.49. However, investor enthusiasm was dampened by Amazon’s cautious outlook for the upcoming quarter, which caused its stock to drop by up to 4% in after-hours trading.
The growth of Amazon’s cloud division, Amazon Web Services (AWS), saw a 19% increase, matching the previous quarter’s rate. AWS generated $28.79 billion in revenue, slightly falling short of market expectations. CEO Andy Jassy highlighted Amazon’s innovation, particularly in artificial intelligence (AI), AI chip technology, and data analytics advancements. Despite AWS’s solid performance, the company’s cloud unit showed signs of weakness, a trend also observed at competitors Google and Microsoft. This slowdown is occurring as investors reassess AI investments made in recent years, seeking more immediate returns.
Amazon’s retail business benefited from a strong holiday season, with sales rising 7% to $75.56 billion, exceeding projections. The company also reported significant improvements in its delivery capabilities, with 65% more items reaching U.S. Amazon Prime members the same day or overnight compared to the previous quarter. Additionally, Amazon launched a new shopping app, Amazon Haul, and hosted record-breaking sales events for Black Friday Week and Cyber Monday.
Looking forward, Amazon’s guidance for the next quarter predicts sales between $151 billion and $155.5 billion, falling short of the anticipated $158.5 billion. The company also warned of a $2.1 billion negative impact from foreign exchange rates. The U.S. dollar has strengthened significantly, which is expected to impact Amazon’s earnings in the current quarter.
Despite the mixed outlook, Amazon’s long-term prospects remain promising. Portfolio manager Eric Clark notes that Amazon has the potential for significant growth, particularly given its leadership in retail, cloud computing, and AI. He sees Amazon as a strong competitor to Walmart in the race for $1 trillion in annual revenue, with just 9.7% annualized growth required over the next five years to reach that milestone.
